One other thing I just thought of. When I entered staking income as rental of personal property on Sch 1, TT did generate the form on Passive Loss caryovers even though mine was all zero. So I'm now wondering if someone had rental real estate and rental personal property, if that income from rental personal property WOULD offset passive losses from rental real estate? I have not yet looked closer at this because it does not apply to me at this time. However, this could be important in your case because you give the impression that was your goal in wanting to put it on Schedule E. In my case, I don't currently own rental real estate, so my tax comes out the same regardless. If you enter your staking income as income from rental of personal property on Sch 1 and TT does offset that with any passive losses you might have on rental real estate, then that might be another reason to also file the Form 8275. By going by the exact wording of the combination of Notice 2014-21 and Reg § 1.61–8, the IRS might not be in the best position to complain. After all, that is basically exactly what they said to do. But they still could complain about it. If they do, the filing of Form 8275 could help prevent them from also being able charging penalties. You put them on notice that was your position.
